TORONTO, ONTARIO--(Marketwire - Nov. 25, 2011) - To mark Financial Literacy Month, which was launched by Finance Minister Jim Flaherty, BMO is releasing a series of financial tips throughout November. As part of Making Money Make Sense and BMO SmartSteps, BMO's tips are designed to help individuals and families save and manage their day to day finances more effectively.

BMO's Tip of the Day: Consider taking out a loan to maximize your contribution to your Registered Retirement Savings Plan (RRSP) and take advantage of the tax benefits

When borrowing to maximize your RRSP contribution, while the interest accumulated on the loan is not tax-deductible, the tax refund you get by making a larger contribution is often enough to pay off the principal of the loan.

For instance, assume your tax rate is 25 per cent, and you have $1,500 to contribute to an RRSP. If you borrow an additional $500 for a total RRSP contribution of $2000, you will get a tax refund of $500. You can then take the refund and immediately pay off the loan.

Borrowing money allows you to increase your RRSP contribution for the year. Many financial institutions, including BMO Bank of Montreal, offer a variety of low interest loan options specifically for this purpose.

"Taking out an RRSP loan can make sense if you have accumulated a significant amount of unused RRSP room because it allows you to maximize your contribution," said Tina Di Vito, Head of the BMO Retirement Institute and author of the recently released 52 Ways to Wreck Your Retirement… and How to Rescue It. "However, a general rule of thumb is to only borrow if you're confident you are able to repay the loan within one year."

Ms Di Vito advises that, in order to avoid borrowing on an annual basis, a simple strategy worth considering is to pay off your loan within six months, and then redirect those payments to your RRSP instead. That way, when the deadline comes, you have already made your annual contribution and have saved money in interest payments.

BMO Financial Literacy Month Tips

November 1: Pay more than the minimum payment on a credit card balance.